I interviewed David Smith, economics editor of the Sunday Times last week. I have written up the best bits of our talk in the magazine (out on Friday). One bit that didn’t make into the mag was that about Smith’s all-time favourite chancellors.
He has a soft spot for Alistair Darling (who did a good job at an awful time, despite having a rubbish relationship with his PM). But top of his list was Geoffrey Howe – who also came in at a very difficult time and had a tricky PM to deal with.
The Tories took over in 1979 and were almost immediately dealing with the second oil shock and with super-high inflation. But into that, Howe did “something quite extraordinary”, says Smith. He announced an austerity budget in 1981.
It instantly provoked a letter from 364 economists saying that it was a lousy idea – that it would deepen the recession and kill the economy. So pushing ahead with it was very bold indeed – as were some of his other policies such as abolishing exchange controls in 1979 (something many thought would lead to instant currency collapse) and cutting the top and basic rates of tax hugely. It worked, says Smith.
Chancellors should be judged by “not just things they have to deal with, but what shape they leave the economy in… and there is no doubt that Howe left it in a much better shape.”
The full interview will be out on video at the end of the week.